The number of Americans filing for jobless benefits fell last week and layoffs in December were the smallest in 15-1/2 years, pointing to a firmer labour market even as economic growth appears to have slowed sharply in the fourth quarter. 
Coming on the heels of a report on Wednesday showing private payrolls in December notched their biggest increase in a year, the data yesterday suggest the economy’s fundamentals remain healthy as it struggles against the headwinds of a strong dollar, bloated inventories and energy sector investment cuts. 
Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 277,000 for the week ended January 2, the Labour Department said. The decline partially unwound the prior week’s jump, which had lifted claims to their highest level since early July. 
Claims were volatile in December, reflecting the challenges of adjusting the data around holidays. Last week was the 44th straight week that claims held below the 300,000 mark, which is associated with a healthy labour market. 
That is the longest run since the early 1970s. 
“Unemployment claims tend to exhibit heightened volatility throughout the holiday season, even after seasonal adjustment; however, the current data continue to indicate that US labour markets are fundamentally healthy,” said Jesse Hurwitz, an economist at Barclays in New York. 
The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, slipped 1,250 to 275,750 last week. 
In a separate report, global outplacement consultancy Challenger, Gray & Christmas said US-based employers announced plans to cut 23,622 jobs in December, the fewest since June 2000. That was down 24% from November and the lowest December job-cut total on record. 
The good news on the labour market comes ahead of the release today of the government’s closely watched employment report for December. According to a Reuters survey of economists, nonfarm payrolls likely increased 200,000 in December, on top of the 211,000 jobs added in November. The unemployment rate is seen unchanged at a 7-1/2-year low of 5%. 
“The apparent improvement in job security around the end of the year is good news for the nation’s workers,” said John Challenger, chief executive officer of Challenger, Gray & Christmas.
Meanwhile, the US manufacturing sector contracted further in December, as the impact of a stronger US dollar undermined export profitability, while US construction spending fell for the first time in nearly 1-1/2 years in November, suggesting only moderate economic growth in the fourth quarter of 2015. 
The US Institute for Supply Management (ISM) said its index of national factory activity fell to 48.2 from 48.6 in November and is now at its lowest level since June 2009. 
A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction. The reading was just below expectations of 49 from a Reuters poll of 80 economists. 
The employment index fell to 48.1 from 51.3 a month earlier. Expectations called for a reading of 50. 
An alternative reading from private data vendor Markit showed continued expansion in manufacturing but at a slower pace. 
Markit’s purchasing managers’ index (PMI) fell to 51.2 from 52.8 in November, the lowest since October 2012. 
The new orders subcomponent fell to 50.2 from 53.1, the lowest since Sept 2009. 
US construction spending fell for the first time in nearly 1-1/2 years in November as a drop in nonresidential investment offset an increase in housing activity. 
Construction spending slipped 0.4%, the first and also biggest drop since June 2014, after a downwardly revised 0.3% gain in October, the Commerce Department said. 
The government revised construction data from January 2005 through October 2015 because of a “processing error in the tabulation of data.” The revisions, which showed construction spending was not as strong as previously reported for much of 2015, could prompt economists to lower their fourth-quarter gross domestic product estimates. 
Growth estimates are currently hovering below a 2.0% annual pace. The economy expanded at a 2.0% rate in the third quarter. Economists polled by Reuters had forecast construction spending rising 0.6% in November after a previously reported 1.0% increase in October. 
Construction outlays were up 10.5% compared to November of last year. Construction spending in November was held down by a 0.8% drop in nonresidential construction. Outlays on residential construction rose 0.2%. 
Private construction spending slipped 0.2%, but spending on private residential construction rose 0.3%. 
Public construction outlays declined 1.0%. Spending on state and local government construction projects, which is the largest portion of the public sector segment, slipped 0.4%. Federal government outlays tumbled 7.2%.